BAGHDAD, Aug 7 (AFP) - Deadly clashes rumbled on between US troops and Shiite Muslim fighters in Baghdad and the holy city of Najaf Saturday, as Iraq`s caretaker government closed Al-Jazeera`s office in the capital for a month after accusing it of fomenting violence.
Prime Minister Iyad Allawi said the decision to close the pan-Arabic satellite channel came after an independent committee monitored Al-Jazeera "to see what kind of violence they are advocating, inciting hatred and problems and racial tensions."
Allawi also announced a limited amnesty for people on the margins of the country`s bloody insurgency had been signed into law.
The one-month amnesty covers those who possess or who have dealt in light arms, possess explosive devices or materials and those who have shielded individuals or groups planning or financing terrorist acts, he said.
The law, which had been due to be announced last month, will "allow citizens to rejoin civil society ... instead of wasting their lives pointlessly towards a lost cause," the prime minister told a press conference.
But he stressed it did not cover killers, who he vowed would be caught.
However, the insurgency showed no signs of abating as seven people were killed and nearly 30 wounded in fighting with US forces in Baghdad`s Shiite Sadr City slum, a stronghold of radical cleric Moqtada Sadr, medics said.
US tanks smashed through makeshift barriers of bricks and burning tyres into the slum, coming under rocket-propelled grenade and mortar fire from Sadr`s Mehdi Army fighters, an AFP photographer said.
Terrified residents huddled in alleyways as they watched the clashes.
In Najaf, US planes circled overhead as US marines and Iraqi forces clashed with Sadr`s militiamen, with gunfire, mortars and rockets rattling through the deserted centre of the holy city before quiet returned in the early afternoon.
Police confirmed that governor Adnan al-Zorfi`s ultimatum for the militia to leave or face the consequences would expire at 6:00 pm (1400 GMT).
Panicked Najaf residents, who were sometimes caught in crossifires during an uprising Sadr launched in the area in the spring, fled their homes to escape the latest round of ground fighting.
The US military has said it has recently killed 300 insurgents in the city alone -- although Sadr aides insist no more than nine militiamen have died.
Combined tolls from medics put the number of dead at 74 and more than 200 wounded in the fighting over the past several days which also spread to Baghdad and other southern Shiite cities.
Five US marines have been killed and 12 wounded in the Najaf province fighting. Another US soldier was killed in an ambush in western Baghdad.
But doctors expect provisional death tolls to go up. Ambulances have been barred from the city centre and the scene of the worst fighting.
Echoing pledges from officials in Baghdad, the Najaf police chief ruled out any possibility of talks to revive a June ceasefire.
Allawi described the fighters in Najaf as comprising more loyalists of Saddam Hussein`s ousted regime, and prisoners the former president released before the 2003 US-led invasion of Iraq, than Sadr supporters.
He invited Sadr to run in elections scheduled to take place by January 2005, when Allawi`s US-appointed caretaker government is due to disband.
Saturday also saw a prankster jump into Iraq`s ongoing hostage crisis by sparking reports that an American hostage had been beheaded.
An Islamic website posted a video purportedly showing the murder being carried out by Abu Mussab al-Zarqawi`s Tawid wal Jihad (Unity and Holy War) group, allegedly linked to Al-Qaeda.
Both Al-Jazeera and another Arabic-language satellite channel, Al-Arabiya, showed an excerpt of the footage.
But an Islamic website that posts statements attributed to Zarqawi said it was a hoax. "This video was made by this same American and his colleague in San Francisco," it said.
Hostage-takers have snatched dozens of foreign nationals since April and have executed at least seven of them.
On Saturday, Turkish television said a militant group holding a Turkish truck driver has threatened to kill him in 48 hours if his employer does not withdraw from the country.
The channel, which showed footage of the man with his hooded captors, identified him as Tahsin Top, an employee with the Turkish firm Atahan and said he had entered Iraq on July 24.
Several Turkish truck drivers, transporting mainly supplies to the US army, have been abducted in Iraq and on Monday one, identified as Murat Yuce, was shown in a video being shot in the head by his kidnappers.
In Fort Bragg, North Carolina, meanwhile, a special military court hearing on the Abu Ghraib prison abuse scandal stretched into a fifth day with the defense requesting that top US officials be called to the witness stand.
Private Lynndie England, known worldwide for a photograph showing her holding a leash tied to the neck of a naked inmate, is one of six soldiers facing a possible court martial and prison for abusing Iraqi detainees.
Her defense is arguing that the abuse of detainees at the facility was "systematic" and approved by senior officers.
The army contends, however, that England and some of her fellow military police officers acted in a rogue fashion and were not following orders.
Her lawyers have submitted a list of 158 witnesses it wants summoned, including Defense Secretary Donald Rumsfeld.